Are debt collectors starting to face reality when it comes to payment of overdue bills? Apparently collectors are starting to feel the squeeze themselves as more American become unable to cover their bills in a declining economy.

The New York Times reported lenders and debt collectors are trying to round up whatever money they can, even if it means forgiving a portion of the borrower’s debts. More collectors than ever before are accepting pennies on the dollars in repayment of outstanding debts.

Don Siler, chief marketing officer at a large collection company working with 7 of the 10 major credit card companies, stated, “You can’t squeeze blood out of turnip. The big settlements just aren’t there.”

Don’t mistake lenders’ good will for charity. They are trying to protect themselves while some people are still ready, willing and able to negotiate some type of account payments. Bank of America has waived late fees and lowered interest rates. American Express and Chase Card Services are expected to do the same.

Debt collectors are currently forgiving anywhere from 20 percent to 70 percent of a person’s total credit card debt. After many instances of collection abuse during a recession, debt collectors are taking a different approach by attempting to negotiate outstanding debts amicably.

So what does this mean for you? Debt collectors are more amenable to making deals so it’s a great time to get your finances in order for the new year. Instead of trying to avoid endless telephone calls and letters from debt collectors, face your debts head-on.

• tally your outstanding debt by making a list of all your creditors with account numbers and addresses;
• review your assets including income, bank accounts, home and vehicles to figure out your worth;
• request copies of your free credit report from the three major credit reporting agencies (Equifax, Experian and Transunion) to find possible credit report errors – if you are a victim of identity theft and the debt does not belong to you, no repayment deal is a good one; and
• discuss your finances with a professional attorney who can advise you of the best steps to take to negotiate your bills.

From negotiating bill settlements to claiming Chapter 13 bankruptcy, a professional attorney can help you do what it takes to become financially free for the new year.

After the holidays, many people have good intentions about paying off debt until life starts all over again. As other expenses arise, debt collectors start to call to remind you about unpaid bills. If your phone is ringing endlessly, it’s best to face debt collectors rather than running away.

Newsday recently published a valuable article about dealing with debt collectors and resolving unpaid bills. They offer several useful suggestions about handling debt collection including:

Don’t hide from collection calls and letters. Debt collectors don’t go away. If they cannot reach you at home, they may start to contact your family and employers. Before unresolved debts turn into an embarrassing situation, answer the phone and tell debt collectors the truth about your situation.

Don’t pay more than you owe. Never pay inflated dates with extra service charges. Let debt collectors know you won’t pay more than you actually owe.

Don’t pay dead or dormant debt. Old debts may not even belong to you. Debt collection agencies purchase zombie debts and attempt to collect them from the apparent debtor. The debt may belong to someone else with the same name or address. Get your free credit reports from Experian, Equifax and Transunion to review them for possible inaccuracies. Never admit to a debt that isn’t yours or you may wind up paying it anyway.

Don’t stop communicating with collectors. Cutting off communication could encourage creditors to take more drastic actions to collect the money.

Don’t use all your savings or home equity to pay off debt. You will be left with no resources if an emergency arises.

Negotiate the terms. With so many people unable to pay their bills, collectors are willing to accept pennies on the dollar in repayment of outstanding debts. Take advantage of this tough economic times to negotiate a deal with creditors.

Memorialize your conversation. Write the date, time and nature of every conversation with each creditor. Make sure to get the employee’s name or employee identification number so you can reference the conversations accurately in the future.

Never accept abusive collection calls. Collection agents cannot call you continually or in the middle of the night. It is also debt collection abuse to unreasonably threaten you or use profanity during a conversation.

If you are facing debt collection and collection abuse, contact a professional attorney to discuss your options. You will be pleasantly surprised to find out there are many ways to attain financial freedom. A professional attorney will help you identify credit reporting errors, renegotiate debt and eliminate collection abuse.